The amount of tax relief you can get on pension contributions as per this page:
Tax relief on contributions
The amount of tax relief you can get on your own contributions to a pension depends on your age...www.pensionsauthority.ie
Do employer contributions contribute to this?
I.e. I am between 30 and 40 and currently I put 12% into my pension and my company puts 8% in. Can I increase my contributions to 20% and still get tax relief?
Thanks
I wasn’t aware of this.
I’m in a company scheme, but I had assumed the employers contribution counted towards the total. Seems I can increase my contributions by 5% straight away as that’s what my employer is contributing.
I wasn’t aware of this.
I’m in a company scheme, but I had assumed the employers contribution counted towards the total. Seems I can increase my contributions by 5% straight away as that’s what my employer is contributing.
Didn't think you could save PRSI/USC on pension contributions now. ?I’ve often wondered how many people are actually aware they could be negotiating pay increases into increased employer contributions instead, saving themselves and the company PRSI/USC, increasing what they can get into their pension etc. It does not seem to be widely known by employees.
Didn't think you could save PRSI/USC on pension contributions now. ?
But that would simply add to costs and decrease profitability. Additionally it would mean that the Employee never gets any additional income in order to save, buy a home.It’s a fair question. The point the contributor was making is that an employee might be better served negotiating an employer pension contribution rather than a salary increase.
You're over complicating this.It's a double edged sword I know, I like the idea, but it simply doesn't work.
But that would simply add to costs and decrease profitability
I get it now but I wonder what Revenue would say it doesn't sound like something that they would sanction. Its effectively denying them of income tax, EE and ER Prsi plus USC .How so?
It actually does the opposite; both are deductible for corporation tax purposes. Take a €10k employer contribution. It costs the employer €8,750 net of tax. €10k of salary, on the other hand, gives rise to a PRSI charge, so that’s €9,691 net of tax.
I agree with RedOnion’s point regarding someone who’s at or above the €115k salary level. But even take someone who’s not:
Say I’m on €80k a year and contributing €10k a year to my pension. It’s effectively costing me €6k of net income foregone to do so. Next time there’s an enhancement to my total remuneration up for grabs, why wouldn’t I look for a €10k employer pension contribution rather than a €10k salary increase? I could then stop contributing €10k myself, freeing up €6k of cashflow for myself. Whereas a €10k salary increase will only yield €4,800 of after-tax income.
The whole exercise is essentially an arbitrage around PRSI/USC; people do need to be mindful of the rules around ‘salary sacrifice’ though.
That's where salary sacrifice comes in. There's lots of revenue guidance on the topic - section 118B of the TCA if you want to read up on it.I wonder what Revenue would say
Thanks I will, never knew of such a thing.That's where salary sacrifice comes in. There's lots of revenue guidance on the topic - section 118B of the TCA if you want to read up on it.
I can't actually do the above, because I can't show a bone fide contract change, so it would be deemed a salary sacrifice and I would be taxed in it.
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